R.A. No.

337, General Banking Act

REPUBLIC ACT NO. 337
AN ACT REGULATING BANKS AND BANKING INSTITUTIONS AND
FOR OTHER PURPOSES
CHAPTER I Title and Definitions
Section 1. The short title of this Act shall be "The General Banking Act."
Section 2. Only duly authorized persons and entities may engage in the lending
of funds obtained from the public through the receipt of deposits or the sale of
bonds, securities, or obligations of any kind, and all entities regularly
conducting such operations shall be considered as banking institutions and shall
be subject to the provisions of this Act, of the Central Bank Act, and of other
pertinent laws. The terms "banking institution" and "bank," as used in this Act,
are synonymous and interchangeable and specifically include banks, banking
institutions, commercial banks, savings banks, mortgage banks, trust companies,
building and loan associations, branches and agencies in the Philippines of
foreign banks, hereinafter called Philippine branches, and all other corporations,
companies, partnerships, and associations performing banking functions in the
Philippines.
Persons and entities which receive deposits only occasionally shall not be
considered as banks, but such persons and entities shall be subject to regulation
by the Monetary Board of the Central Bank; nevertheless, in no case may the
Central Bank authorize the drawing of checks against deposits not maintained in
banks, or branches or agencies thereof.
The Monetary Board may similarly regulate the activities of persons and entities
which act as agents of banks.
Section 3. Insurance companies are exempted from the provisions of this Act,
but such companies shall present to the Central Bank such information, data or
reports as the Monetary Board may require in order to ascertain the effects of
the operations of insurance companies on the monetary, credit, and exchange
situation in the Philippines.
Section 4. Cases of doubt as to the banking character of the activities of any
person or entity, and to the consequent applicability of this Act, shall be decided
by the Monetary Board subject to judicial review. The Board may, through the
Superintendent of Banks, examine, inspect or investigate the books and records
of such person or entity for the purpose of resolving the question.
Section 5. The following terms shall be held to be synonymous and
interchangeable:
(a) "Commercial bank" and "commercial banking corporation;
(b) "Savings bank," "mortgage bank," and "savings and mortgage bank";
(c) "Building and loan association" and mutual "building and loan association";
(d) "Trust company" and "trust corporation"; and
(e) "Foreign bank" and "foreign banking corporation."
Section 6. No person, association or corporation not conducting the business of
a commercial banking corporation, trust corporation, savings and mortgage
bank, or building and loan association, as defined in this Act, shall advertise or
hold itself out as being engaged in the business of such bank, corporation or
association, or use in connection with its business title the word or words
"bank," "banking," "banker," "building and loan association," "trust
corporation," "trust company," or words of similar import, or solicit or receive
deposits of money for deposit, disbursement, safekeeping, or otherwise, or
transact in any manner the business of any such bank, corporation or
association, without having first complied with the provisions of this Act in so
far as it relates to commercial banking corporations, trust corporations, savings
and mortgage banks, or building and loan associations, as the case may be. For
any violation of the provisions of this section by a corporation, the officers and
directors thereof shall be jointly and severally liable. Any violation of the
provisions of this section shall be punished by a fine of five hundred pesos for
each day during which such violation is continued or repeated, and in default of
the payment thereof, subsidiary imprisonment as prescribed by law.
CHAPTER II Establishment of Domestic Banks
Section 7. Domestic banking institutions, except building and loan associations,
shall be organized in the form of stock corporations.
Section 8. No banking institution shall issue no par value stock.
Section 9. The Securities and Exchange Commissioner shall not register the
articles of incorporation of any bank, or any amendment thereto, unless
accompanied by a certificate of authority issued by the Monetary Board, under
its official seal. Such certificate shall not be issued unless the Monetary Board is
satisfied from the evidence submitted to it: (a) that all the requirements of
existing laws and regulations to engage in the business for which the applicant
is proposed to be incorporated have been complied with; (b) that the public
interest and economic conditions, both general and local, justify the
authorization; and (c) that the amount of capital, the financing organization,
direction and administration, as well as the integrity and responsibility of the
organizers and administrators reasonably assure the safety of the interests which
the public may entrust to them.
Section 10. The Securities and Exchange Commissioner shall not register the
by-laws of any bank or banking institution, or any amendment thereto, unless
accompanied by a certificate of the Monetary Board to the effect that such by-
laws or amendment thereto are in accordance with law.
Section 11. After the approval of this Act, no bank which may be established
and licensed to do business in the Philippines shall receive deposits, unless
incorporated under the laws of the Republic of the Philippines: Provided,
however, That this prohibition shall not apply to branches and agencies of
foreign banks which, at the time of the approval of this Act, are actually
receiving deposits: And provided, further, That, after the passage of this Act, all
deposits so received by such branches and agencies of foreign bank shall not be
invested in any manner outside the territorial limits of the Republic of the
Philippines.
Section 12. At least sixty per cent (60%) of the capital stock of any banking
institution which may be established after the approval of this Act shall be
owned by citizens of the Philippines.
Section 13. At least two-thirds of the members of the board of directors of any
bank or banking institution which may be established after the approval of this
Act shall be citizens of the Philippines.
CHAPTER III Licensing of Foreign Banks
Section 14. No foreign bank or banking corporation formed, organized or
existing under the laws other than those of the Republic of the Philippines shall
be permitted to transact business in the Philippines, or maintain by itself or
assignee any suit for the recovery of any debt, claims, or demand whatsoever,
until after it shall have obtained, upon order of the Monetary Board, a license
for that purpose from the Securities and Exchange Commissioner. Any officer,
director or agent of any such corporation who transacts business in the
Philippines without the said license shall be punished by imprisonment for not
less than one year nor more than ten years and by a fine of not less than one
thousand pesos nor more than ten thousand pesos.
For the issuance of such license to any foreign bank, the Securities and
Exchange Commissioner shall collect a fee in proportion to the corporate capital
of such bank in accordance with the schedule established in section eight of Act
Numbered Fourteen hundred and fifty-nine, as amended.
No order for a license shall be issued by the Monetary Board unless and until it
is convinced that the public interest and economic conditions, both general and
local, justify the issuance of such order; that the foreign bank or banking
corporation is solvent and in sound financial condition; and that a duly
appointed agent in the Philippines has been authorized to accept summons and
legal processes.
Section 15. No foreign building and loan association or building and loan
association not formed, organized, or existing under the laws of the Philippines
shall be permitted to transact business in the Philippines.
Section 16. The Monetary Board, by the affirmative vote of at least five of its
members and with the approval of the President of the Philippines, may revoke
the license to transact business in the Philippines of any foreign bank or banking
corporation not formed, organized, or existing under the laws of the Philippines,
if the said Board finds after due investigation at which such bank or banking
corporation is given a chance to be heard by itself or counsel, that the foreign
bank or banking corporation is in imminent danger of insolvency or that its
continuance in business will involve probable loss to those transacting business
with it. After the revocation of its license, it shall be unlawful for any such
foreign bank or banking corporation to transact business in the Philippines
unless its license is renewed or reissued. After the revocation of such license the
Solicitor General shall take such proceedings as may be proper to protect
creditors of such foreign bank or banking institution and the public.
Section 17. Summons and legal process served upon the Philippine agent of any
foreign banking corporation designated to accept service thereof shall give
jurisdiction to the courts over such banking corporation, and service of notices
on such agent shall be as binding upon the corporation which he represents as if
made upon the corporation itself.
Should the authority of such agent to accept service of summons and legal
processes for the corporation or notice to it be revoked, or should such agent
become mentally incompetent or otherwise unable to accept service while
exercising such authority, it shall be the duty of the corporation to name and
designate promptly another agent upon whom service of summons and
processes in legal proceedings against the corporation and of notices affecting
the corporation may be made, and to file with the Securities and Exchange
Commissioner a duly authenticated nomination of such agent.
Should there be no person authorized by the corporation upon whom service of
summons, processes, and all legal notices may be made, service of summons,
processes and legal notices may be made upon the Superintendent of Banks and
such service shall be as effective as if made upon the corporation or upon its
duly authorized agent. In case of service for the corporation upon the
Superintendent of Banks, the said Superintendent shall register and transmit by
mail to the president or the secretary of the corporation at its head or principal
office a copy, duly certified by him, of the summons, process, or notice. The
sending of such copy of the summons, process, or notice shall be a necessary
part of the service and shall complete the service. The registry receipt of mailing
shall be prima facie evidence of the transmission of the summons, process or
notice. All costs necessarily incurred by the said Superintendent for the making
and mailing and sending of a copy of the summons, process, or notice to the
president or the secretary of the corporation at its head or principal office shall
be paid in advance by the party at whose instance the service is made.
Section 18. In all matters not specifically covered by special provisions
applicable only to foreign banks, or their branches and agencies in the
Philippines, any foreign banking corporation or foreign bank not formed,
organized, or existing under the laws of the Philippines but lawfully doing
business in the Philippines shall be bound by all laws, rules, and regulations
applicable to domestic banking corporations of the same class, except such
laws, rules and regulations as provide for the creation, formation, organization,
or dissolution of corporations or as fix the relation, liabilities, responsibilities, or
duties of members, stockholders, or officers of corporations, to each other or to
the corporation.
Section 19. Residents and citizens of the Philippines who are creditors of a
branch or agency in the Philippines of a foreign bank or banking corporation
shall have preferential rights to the assets of such branch or agency.
CHAPTER IV Commercial Banking Corporations
Section 20. A commercial banking corporation shall be any corporation which
accepts or creates demand deposits subject to withdrawal by check.
Section 21. A commercial banking corporation, in addition to the general
powers incident to corporations, shall have all such powers as shall be necessary
to carry on the business of commercial banking, by accepting drafts and issuing
letters of credit, by discounting and negotiating promissory notes, drafts, bills of
exchange, and other evidences of debt; by receiving deposits; by buying and
selling foreign exchange and gold or silver bullion, and by lending money
against personal security or against securities consisting of personal property or
first mortgages or improved real estate and the insured improvements thereon.
No loan on the security of real estate shall have a maturity in excess of fifteen
years but the aggregate of such loans on real estate security shall not exceed
seventy per cent (70%) of the total savings deposits of the bank.
Nothing in this section shall be construed as preventing a commercial bank from
accepting real estate security in order to protect itself from loss on account of a
loan previously contracted in good faith, nor shall there be included in the
foregoing limitations loans made on the security of real estate arising out of the
sale of property owned by such bank.
Commercial banks may acquire high-grade bonds and other evidences of
indebtedness. Except in exceptional circumstances, however, the Monetary
Board shall not permit commercial banks to invest in securities having
maturities greater than three years from the date of acquisition by the bank an
amount in excess of twenty per cent (20%) of its total deposits.
Section 22. The combined capital accounts of each commercial bank shall not
be less than an amount equal to fifteen per cent (15%) of its total assets,
excluding the following assets:
(a) Cash on hand;
(b) Amounts due from banks, both at home and abroad, including all deposits
with the Central Bank; and
(c) Evidences of indebtedness of the Republic of the Philippines and of the
Central Bank, and any other evidences of indebtedness or obligations the
servicing and repayment of which are fully guaranteed by the Republic of the
Philippines.
The Monetary Board shall prescribe the manner of determining the total assets
of banking institutions for the purposes of this section, but contingent accounts
shall not be defined as being included among total assets.
Whenever the capital accounts of a bank are deficient with respect to the
requirements of this Act, the Monetary Board, after considering a report of the
Superintendent of Banks on the state of solvency of the institution concerned,
shall limit or prohibit the distribution of net profits and shall require that part or
all of net profits be used to increase the capital accounts of the institution until
the minimum requirement has been met. The Monetary Board may,
furthermore, after considering the aforesaid report of the Superintendent of
Banks and if the amount of the deficiency justifies it, restrict or prohibit the
making of new investments of any sort by the bank, with the exception of
purchases of readily marketable evidences of indebtedness included under
subsection (c) of this section, until the minimum required capital ratio has been
restored.
Section 23. Except as the Monetary Board may otherwise prescribe, the total
liabilities of any person, company, corporation or firm, to a commercial banking
corporation for money borrowed, with the exception of money borrowed against
obligations of the Central Bank or of the Philippine Government, or borrowed
with the full guarantee by the Government of payment of principal and interest,
shall at no time exceed fifteen per cent (15%) of the unimpaired capital and
surplus of such bank.
The total liabilities of any borrower may amount to a further fifteen per cent
(15%) of the unimpaired capital and surplus of such banking corporation
provided the additional liabilities are adequately secured by shipping
documents, warehouse receipts or other similar documents transferring or
securing title covering readily marketable, non-perishable staples which staples
must be fully covered by insurance, and must have a market value equal to at
least one hundred and twenty-five per cent (125%) of such additional liabilities.
The term "liabilities" as used herein, shall mean the direct liability of the maker
or acceptor of paper discounted with or sold to such bank and the liability of the
endorser, drawer, or guarantor who obtains a loan from or discounts paper with
or sells paper under his guaranty to such bank and shall include in the case of
liabilities of a co-partnership or association the liabilities of the several
members thereof and shall include in the case of liabilities of a corporation all
liabilities of all subsidiaries thereof in which such corporation owns or controls
a majority interest. But the discount of bills of exchange drawn in good faith
against actually existing values, and the discount of commercial or business
paper actually owned by the person negotiating the same, shall not be
considered as money borrowed, for the purposes of this section.
Section 24. No commercial bank shall make any loan or discount on the security
of shares of its own capital stock, nor be the purchaser or holder of any such
shares, unless such security or purchase be necessary to prevent loss upon a debt
previously contracted in good faith, and the stock so purchased or acquired, or
purchased or acquired for any other reason in the course of its operations, shall,
within six months from the time of its purchase or acquisition, be sold or
disposed of at public or private sale or in default thereof, a receiver shall be
appointed to close up the business of the bank in accordance with law.
Section 25. Any commercial bank may purchase hold, and convey real estate for
the following purposes:
(a) Such as shall be necessary for its immediate accommodation in the
transaction of its business: Provided, however, That the total investment in such
real estate and improvements thereof shall not exceed twenty-five per cent
(25%) of its paid-up capital stock and surplus;
(b) Such as shall be mortgaged to it in good faith by way of security for debts;
(c) Such as shall be conveyed to it in satisfaction of debts previously contracted
in the course of its dealings;
(d) Such as it shall purchase at sales under judgments, decrees, mortgages, or
trust deeds held by it and such as it shall purchase to secure debts due to it.
But no such bank shall hold the possession of any real estate under mortgage or
trust deed, or the title and possession of any real estate purchased to secure any
debt due to it, for a longer period than five years.
Section 26. The deposit liabilities of commercial banks, including the Philippine
National Bank, shall be subject to the reserve requirements and other conditions
prescribed by the Monetary Board in accordance with the authority granted to it
under the provisions of the Central Bank Act.
Section 27. Any commercial bank organized under the laws of the Philippines
may, with the prior approval of the Monetary Board, establish branches in the
Philippines or branches or agencies outside the Philippines, and the bank shall
be responsible for all business conducted in such branches to the same extent
and in the same manner as though such business had all been conducted in the
head office.
For the purposes of this Act, a bank and its branches shall be treated as a unit.
Section 28. The Monetary Board, by the affirmative vote of at least five of its
members, may compel the head office of any commercial bank organized under
the laws of the Philippines to liquidate the business of any branch or agency if
the business of such branch or agency is being conducted unlawfully or in a
manner likely to prejudice the interests of the creditors of the branch or agency
or of the head office.
CHAPTER V Savings and Mortgage Banks
Section 29. A savings and mortgage bank shall be any corporation organized
primarily for the purpose of accumulating the small savings of depositors and
investing them, together with its capital, in bonds or in loans secured by bonds,
real estate mortgages, and other forms of security, as hereinafter provided.
Section 30. The combined capital accounts of each savings and mortgage bank
shall not be less than an amount equal to fifteen per cent (15%) of its total
assets, after deducting the following assets:
(a) Cash on hands;
(b) Amounts due from banks, both at home and abroad, including all deposits
with the Central Bank; and
(c) Evidences of indebtedness of the Republic of the Philippines and of the
Central Bank, and any other evidences of indebtedness or obligations the
servicing and repayment of which are fully guaranteed by the Republic of the
Philippines.
The Monetary Board shall prescribe the manner of determining the total assets
of banking institutions for the purposes of this section, but contingent accounts
shall not be defined as being included among total assets.
Whenever the capital accounts of a bank are deficient with respect to the
requirements of the preceding paragraph, the Monetary Board, after considering
a report of the Superintendent of Banks on the state of solvency of the
institution concerned, shall limit or prohibit the distribution of net profits and
shall require that part or all of net profits be used to increase the capital accounts
of the institution until the minimum requirement has been met. The Monetary
Board may, after considering the aforesaid report of the Superintendent of
Banks and if the amount of the deficiency justifies it, restrict or prohibit the
making of new investments of any sort by the bank, with the exception of
purchases of the evidences of indebtedness included under subsection (c) of this
section until the minimum required capital ratio has been restored.
Section 31. The loans and investments of savings and mortgage banks shall be
limited to the following:
(a) Loans with the security of their own savings deposit obligations or of
mortgage and chattel mortgage bonds which they have issued, or with the
security of savings deposit obligations of other banks doing business in the
Philippines;
(b) Medium-term loans of the following types:
(1) Loans for the encouragement of cattle, carabao and other livestock breeding,
with maturities up to three years. Such loans shall be repaid in regular
installments and shall have as principal security a lien on the animals, the bank
being empowered, however, to require, in addition, real estate and other
securities to its satisfaction. The amount of any such loan, shall not exceed fifty
per cent (50%) of the commercial value of the animals at the time the loan is
made, but similar additional loans, up to fifty per cent (50%) may be made as
the value of the stock increases.
(2) Equipment loans, with maturities up to five years, for the acquisition of
fertilizers and any instruments, machinery and other movable equipment used in
the production, processing, transformation, handling or transportation of
agricultural and industrial products. Such loans shall constitute a first lien on the
assets acquired with the proceeds of the loan, the bank being empowered,
however, to require as additional security a lien or mortgage on other properties
of the debtor.
(c) Mortgage loans, with maturities up to ten years for the conservation,
enlargement or improvement of productive properties, or the acquisition of
machinery or other fixed installations. Such loans shall be secured by a first
mortgage on the property.
(d) Real estate mortgage loans with maturities of not more than twenty years,
for the following purposes only:
(1) For the construction, acquisition, expansion or improvement of rural and
urban properties;
(2) For the refinancing of similar loans and mortgages; and
(3) For such other purposes as may be authorized by the Monetary Board.
(e) High-grade bonds and other evidences of indebtedness, and loans against
such obligations;
(f) Drafts, bills of exchange, acceptances, or notes arising out of current
commercial transactions which are endorsed or accepted by any solvent bank
operating in the Philippines. The aggregate investments in this class shall not
exceed ten per cent (10%) of the total assets of the bank;
(g) Collateral trust funds or notes, or obligations secured by such bonds or
notes, secured by a first mortgage or by a participating interest in a first
mortgage on improved urban or rural real estate in cities and municipalities of
the Philippines, provided that such bonds and notes shall have been outstanding
for at least three years prior to their purchase by the savings bank, and provided
that during that period the earnings of the property mortgaged and available for
paying interest have been equal to at least two hundred per cent (200%) of the
annual interest payable on account of all first mortgage obligations outstanding.
No such bonds or notes, or obligations secured thereby, shall be purchased by
the bank if the aggregate of first mortgage obligations outstanding against the
property exceeds seventy per cent (70%) of the appraised value thereof;
(h) Loans secured by the pledge to the corporation of gold or silver bullion:
Provided, That the loans shall not exceed ninety per cent (90%) of the value of
the pledge by which the loan is secured;
(i) Loans with first mortgages transferred to the corporation as collateral
security on improved and otherwise unencumbered real estate in cities and
municipalities in the Philippines: Provided, however, That the mortgage
transferred to the corporation as collateral security with interest accrued and due
shall not exceed sixty per cent (60%) of the appraised value of the real estate
and insured improvements which secure such mortgage.
Notwithstanding any provisions in this or any other Act to the contrary, any
savings and mortgage bank, existing or doing business on the date of the
approval of this Act and engaged in the business of lending of money against
the pledge of jewelry, precious stones and articles of similar nature, may
continue to engage in such business.
Section 32. Except as the Monetary Board may otherwise prescribe, the direct
indebtedness to a savings and mortgage bank of any person, company,
corporation or firm, including in the indebtedness of the company or firm the
indebtedness of the several members thereof, for money borrowed, with the
exception of money borrowed against obligations of the Central Bank or of the
Philippine Government, or borrowed with the full guarantee by the Government
of payment of principal and interest, shall at no time exceed twenty-five per cent
(25%) of the unimpaired capital and surplus of the bank: Provided, however,
That this limitation shall not apply to loans made under subsection (f) of section
thirty-one.
Section 33. Any savings and mortgage bank may, with the approval of the
Monetary Board, issue mortgage and chattel mortgage certificates, buy and sell
them for its own account or for the account of others, or accept and receive them
in payment or as amortization of its loans.
Such mortgage and chattel mortgage certificates shall be issued exclusively in
national currency and exclusively for the financing of the loans enumerated in
subsections (b), (c), and (d) of section thirty-one. The Monetary Board may
issue such regulations as it deems necessary with respect to the maturities, rates
of interest, denominations and other conditions pertaining to such certificates.
The bank shall strive to coordinate the amounts and maturities of its certificates
with those of its loans, so as to ensure adequate cash receipts for the payment of
principal and interest at the time they become due.
Savings and mortgage banks shall accept their own certificates at least at the
actual price of issue, in any prepayment of loans which mortgage or chattel
mortgage debtors may wish to make, provided that the date of maturity of the
certificates is not later than the date on which the payment would otherwise
become due, in the absence of the aforesaid prepayment.
Section 34. Savings and mortgage banks may purchase, hold and convey real
estate under the same conditions as those governing commercial banks as
specified in section twenty-five of this Act.
Section 35. Married women and minors may, in their own right and in their own
names, make deposits and withdraw the same, and may receive dividends and
interest: Provided, however, That if any guardian shall give notice in writing to
any savings bank not to make payments of deposits, dividends, or interest to the
minor of whom he is guardian, then such payment shall be made only to the
guardian.
Section 36. Savings deposits shall be returned to the depositors or to their legal
representatives upon their petition in the manner and at the time and under the
conditions which shall be determined by the board of directors and stipulated in
regulations which shall be in conformity with law and with such regulations as
the Monetary Board may prescribe.
Section 37. All savings and mortgage banks shall maintain on deposit with the
Central Bank of the Philippines such reserves against their deposit liabilities as
the Monetary Board shall determine in accordance with the pertinent provisions
of the Central Bank Act.
Section 38. Whenever there is a call by depositors of a savings bank for
repayment of their deposits and the call so made shall result in reducing its legal
reserves below the amount required by the Monetary Board, such bank shall not
make any new loans or investment of the funds or depositors or earnings of such
funds until the call of the depositors has been satisfied and its legal reserves
have been restored to the required minimum.
Any officer or director of a savings and mortgage bank who makes or causes to
be made any loan or investment or funds of depositors or of the earnings of such
funds in violation of this section shall be punished by imprisonment for not less
than one year nor more than ten years and by a fine of not less than one
thousand nor more than ten thousand pesos.
CHAPTER VI Building and Loan Associations
Section 39. All corporations whose capital stock is required or is permitted to be
paid in by the stockholders in regular, equal periodical payments and whose
purpose is to accumulate the savings of its stockholders, to repay to said
stockholders their accumulated savings and profits upon surrender of their
shares, to encourage industry, frugality, and home building among its
stockholders, and to loan its funds, and funds borrowed for the purpose, to
stockholders of the security of unencumbered real estate and with the pledge of
shares of the capital stock owned by such stockholders as collateral security,
shall be known as building and loan associations, and the words "mutual
building and loan association" shall form part of the name of every such
association.
It shall be unlawful for any building and loan association to make any loan upon
property that is suitable for only as theater, public hall, church, convent, school,
club, hotel, garage, or other public building: Provided, however, That to
facilitate the investment of the idle funds of a building and loan association, the
Monetary Board may, in special instances, waive the provisions of this
paragraph, in cases of public hall, school, hotel and other public buildings.
With the approval of the Monetary Board, a building and loan association may
also invest such of its funds as may otherwise remain idle, in bonds and
obligations of the Republic of the Philippines, or of any of its political
subdivisions, or of any government-owned or controlled corporation, including
the Central Bank.
Section 40. The articles of incorporation shall state the purpose of the
association as set forth in section thirty-nine.
Section 41. Any person may become a stockholder of any building and loan
association by subscribing for one or more shares therein and signing the by-
laws of the association, following his signature with his post office address, but
no member may borrow upon the security of real estate from any such
association having assets of one hundred thousand pesos or more an amount in
excess of ten per cent (10%) of the total assets of the association, nor may any
such association make a loan upon any one piece of real estate amounting to
more than ten per cent (10%) of the total assets of the association. In the case of
a building and loan association having assets amounting to less than one
hundred thousand pesos, no loan to any one borrower and no loan upon any one
piece of real estate shall exceed ten thousand pesos. The Monetary Board shall
have the power to issue regulations governing the manner of determining such
assets as the basis for computing the foregoing limitations.
Section 42. The capital stock of such associations shall be paid in by the
stockholders in regular, equal, periodical payments known as dues, at such times
and in such amounts as shall be provided in the by-laws of the association. The
dues on each share of stock subscribed for by a stockholder shall continue to be
paid by the stockholder to the association until the share has been duly
withdrawn, cancelled, or forfeited or until the share has reached its matured
value; that is to say, when the dues paid on each share and the net earnings
thereof in accordance with the by-laws shall amount to the matured value of the
share, but such association may issue and sell paid-up stock for each and also
investment stock to be paid in installments, and may pay to the holders of such
paid-up stock out of the net profits such rates of dividends as may be fixed from
time to time by the board of directors of the association, which shall be
expressed in the stock certificates and shall not participate further in the profits
or accretions of the association. Paid-up stock issued after the date when this
Act shall become effective shall not be entitled to vote. The dividends payable
upon such paid-up stock shall not be cumulative in the sense of being a charge
upon the future earnings of the association should the earnings of the association
not be sufficient in any particular year to meet the dividend requirements of
such stock in that year. Either paid-up or investment stock may be surrendered
by the holder at any time upon the giving of such notice as the association may
require.
Section 43. The capital stock of every association shall be divided into shares of
the matured or par value of two hundred pesos each.
Section 44. Certificates of stock shall be issued to each stockholder upon the
payment of the membership fee and first installment of the dues. The
association may charge a membership or entrance fee not exceeding one peso on
each share of stock issued and may also charge a transfer fee not exceeding
twenty centavos on each share transferred, all of which shall be paid into the
treasury and accounted for as funds of the association. Shares which have not
been pledged as security for the payment of a loan shall be called "free shares,"
and shares which have been so pledged shall be called "pledged shares."
Section 45. Payment of dues on shares of stock shall commence from the time
of issue of such shares.
Section 46. Whenever any stockholder shall be six months in arrears in the
payment of his dues upon free shares, the secretary or clerk of the association
shall give him notice in writing of his arrearages by mailing to him at the last
post office address given by him to the association a statement of all such
arrearages. If the stockholder fails to pay within two months after receipt of
such notice the full amount of his arrearages the board of directors may, at its
option, declare his shares forfeited. At the time of the forfeiture the withdrawal
value of the forfeited shares shall be determined and stated by the board of
directors, and the defaulting stockholder shall be entitled to receive such value
without interest upon such notice as is required of a withdrawing stockholder.
Section 47. When the stock shall have reached its matured value, payment of
dues thereon shall cease and holders of such matured shares shall be paid out of
the funds of the association the matured value of their shares with interest
thereon at the rate prescribed in the by-laws, from the time the board of
directors shall declare such shares to have matured until payment is made. The
order of payment of matured shares shall be prescribed in the by-laws and at no
time shall more than one-third of the receipts of the association be applied to the
payment of matured shares without the consent of the board of directors and the
approval of the Monetary Board: Provided, however, That if shares pledged to
the association as security for loans shall mature before the loan is repaid the
matured value may be credited to the loan. The withdrawal value of the pledged
shares shall not be returned to the stockholders unless such value is applied in
liquidation of the loan which the shares secure.
Section 48. By the affirmative vote of a majority of all its directors the
association may borrow money for such temporary uses and purposes as the
exigencies of the business may demand provided such action is consistent with
the objects of the association. The aggregate amount of the outstanding
indebtedness of any such association shall not at any time exceed fifty per cent
(50%) of its capital stock actually paid in: Provided, however, That such
limitation shall not include indebtedness to the Central Bank.
Section 49. In addition to the other requirements established in this Act, every
loan made by the association must be properly evidenced by a note or other
instrument in writing and must be secured by a first mortgage or deed of trust on
unencumbered real estate and also by the pledge to the association of shares of
stock of the association the matured value of which shall at least equal the
amount loaned: Provided, however, That loans may be made on the security of
free shares pledged to the association for the payment of the loan in case, at the
time that the loan is made, the withdrawal value of such free shares under the
by-laws shall exceed the amount borrowed and interest thereon for six months.
Section 50. In the discretion of the board of directors a loan may be repaid by
the surrender of pledged shares whose withdrawal value equals the amount
loaned and all interest and fines due thereon.
Section 51. The rates of interest on loans may be fixed in the by-laws or may be
prescribed from time to time by the board of directors, subject to the provisions
of the Usury Law and to any regulations which the Monetary Board may issue
with respect thereto.
Section 52. Whenever a borrowing stockholder shall be three months in arrears
in the payment of his dues on stock or in the interest or premium or installments
of premium on any loan, the whole loan, at the option of board of directors,
shall become due and payable and the board may proceed by action to enforce
collection upon the securities held by the association. The withdrawal value of
all shares pledged as collateral security at the time of the commencement of the
action shall be applied to the payment of the loan, and such shares from the time
of such application shall be deemed to be surrendered to the association.
Section 53. Mutual building and loan associations may purchase, hold, and
convey real estate under the same conditions as those specified with reference to
commercial banks in section twenty-five of this Act.
Section 54. Stockholders may surrender their shares and withdraw from the
association after paying twelve monthly installments of dues upon giving sixty
days' notice in writing to the board of directors, and the withdrawal value of
such shares shall be the total sum of the dues paid thereon plus not less than
ninety per cent of all dividends earned by such shares up to the end of the last
preceding fiscal period plus such interest for the time elapsed since the end of
that period as shall be allowed by the board of directors. Stockholders who have
not paid twelve monthly installments of dues may, after giving sixty days' notice
in writing to the board of directors, surrender their shares and withdraw from the
association, and the withdrawal value of such shares shall be the total sum of the
dues paid thereon plus such dividend or interest as may be allowed by the board
of directors. In no event, however, shall more than one-third of the total receipts
of the association be paid in any one month to retire such shares. Payment for
such surrendered shares shall be made in the order in which notices of
withdrawal have been received by the board of directors: Provided, That should
the business of the association during the period such withdrawing member has
been a stockholder show a loss in excess of the reserve available for meeting
such loss, the withdrawal value of such shares shall be charged with their
proportion of such loss: And provided, finally, That any fines or charges
lawfully chargeable against such shares may be deducted before making
payment to the stockholder. Except in cases of voluntary or forced liquidation of
a building and loan association or forfeitures as provided in section forty-six of
this Act, the board of directors of such association shall not have power to force
the surrender and withdrawal of unmatured shares.
Section 55. At least once a year the profits on all business transacted shall be
determined by the board of directors and apportioned to all the shares in each
series outstanding at the time of such apportionment on the basis of the actual
value of such shares, as distinguished from their withdrawal value, but in
determining the profits which may be so apportioned, there shall be deducted
from the gross earnings of the association all expenses and losses incurred in
conducting its business. Five per cent (5%) of the net earnings shall be credited
to a reserve account until the reserve equals five per cent (5%) of the total assets
of the association. The reserve shall be maintained at five per cent (5%) of the
total assets and shall be available for meeting losses incurred by the association.
The remainder of the net earnings shall be available for apportionment among
the stockholders. In the event of the liquidation of a building and loan
association there shall escheat to the State any part of the reserve remaining
after charging off all losses and defraying all expenses of liquidation.
CHAPTER VII Trust Corporations
Section 56. Any corporation formed or organized for the purpose of acting as
trustee or administering any trust or holding property in trust or on deposit for
the use, benefit, or behoof of others, shall be known as a trust corporation or
company.
Section 57. A trust company may, with the approval of the Monetary Board, do
a commercial banking business but such business must be kept separate and
distinct from its trust business. All relevant provisions of Chapter IV of this Act
governing the business of commercial banking corporations shall be held to
apply to the commercial banking activities of a trust company.
A commercial banking corporation may, with the approval of the Monetary
Board, be authorized to engage in the business of a trust company, but shall be
subject to the provisions of this Chapter as regards its trust business.
Section 58. A trust company, in addition to the general powers incident to
corporations, shall have power:
(a) To act as trustee on any mortgage or bond issued by any municipality,
corporation, or any body politic and to accept and execute any other municipal
or corporate trust not inconsistent with law;
(b) To act under the order or appointment of any court of record as guardian,
receiver, trustee, or depositary of the estate of any minor, insane person, idiot,
habitual drunkard, or other incompetent or irresponsible person, and as receiver
and depositary of any moneys paid into court by parties to any legal proceedings
and of property of any kind which may be brought under the jurisdiction of the
court by proper legal proceedings;
(c) To act as the executor of any last will or testament when it is named in the
last will and testament as the executor thereof;
(d) To act under appointment of a court of competent jurisdiction as
administrator of the estate of any deceased person, with the will annexed, or as
administrator of the estate of any deceased person when there is no will, and
when in either case there is no person qualified, competent, willing, able and
entitled to accept such administration;
(e) To accept and execute any legal trust confided to it by any court of record or
by any person or corporation for the holding, management, and administration
of any estate, real or personal, and the rents, issues, and profits thereof.
Section 59. Except as may otherwise be provided in this Act, no bond or other
security shall be required from any trust company for the faithful performance
of its duties as trustee, executor, administrator, guardian, receiver, or depositary:
Provided, however, That the court officer appointing such company as trustee,
executor, administrator, guardian, receiver, or depositary may, upon proper
application, showing special cause therefor, require any corporation which shall
seek to be or shall have been so appointed to give adequate security for the
protection of the funds or property confided to the corporation and, upon failure
of such corporation to give the security required, its appointment as trustee,
executor, administrator, guardian, receiver or depositary shall be revoked.
The court shall require such trust company to make all reports, render all
accounts, perform such duties, and do such acts as might be required by the
court of a natural person acting as trustee, executor, administrator, guardian,
receiver, or depositary.
Section 60. Upon the application of any executor, administrator, guardian,
trustee, receiver, or depositary or any other person in interest, any court having
jurisdiction over such officer, trustee, receiver, or depositary and over the
subject matter of the trust or deposit may, upon such notice to the parties in
interest as the court shall direct and after hearing the application and all parties
in interest desiring to be heard, order said officer, receiver, trustee, or depositary
to deposit with some trust company lawfully doing business in the Philippines
the whole or any part of the moneys or personal property held by such officer,
receiver, trustee, or depositary. Upon presentation to the court of the receipt or
written acknowledgment of the trust company that the deposit of said moneys
and personal property has been made in accordance with the order of the court,
the court may order that the bond given or required to be given by such officer,
trustee, receiver or depositary for the faithful performance of his duties be
reduced to such sum as the court may deem proper: Provided, however, That the
reduced bond shall be sufficient to secure adequately the proper administration
and care of any property remaining in the hands or under the control of such
officer, trustee, receiver, or depositary, and the proper accounting for such
property. Property deposited with any trust company in conformity with this
section shall be held by said company under the orders and direction of the
court.
Section 61. All moneys, properties, or securities received by any trust company
as executor of the will of any deceased person or as administrator, with or
without the will annexed, of the estate of any deceased person, or as guardian,
receiver, trustee, or depositary, of the estate of any minor, insane person, idiot,
habitual drunkard, or other incompetent or irresponsible person, or as receiver
or depository under and by virtue of any order or appointment of any court,
shall be kept separate and distinct from all other funds, properties, and assets of
its general business. The accounts of all such moneys, properties, or securities
shall likewise be kept separate and distinct from the accounts of its general
business.
Section 62. No trust company shall have the right to accept any trust whatever
which it would be unlawful for any individual to make, accept, or execute, and
it shall be the duty of a trust company, acting as trustee of any legal trust, to
execute such trust in accordance with the lawful terms of the trust.
Section 63. The lending or investment of deposits or moneys received by any
trust company as executor of the will of any deceased person or as
administrator, with or without the will annexed, or as guardian, receiver, trustee,
or depositary of the estate of any minor, insane person, idiot, habitual drunkard,
or other incompetent or irresponsible person, or as receiver or depositary under
and by virtue of any order or appointment of any court, or as trustee under any
instrument in writing constituting the company a trustee, unless otherwise
directed by the instrument creating the trust, shall be limited to the loans and
investments enumerated in section thirty-one of Chapter V (Savings and
Mortgage Banks). Any officer or director of any trust company authorizing or
making any loan on security otherwise than as provided in this section shall be
punished by imprisonment of not less than one year nor more than ten years and
by a fine of not less than one thousand nor more than ten thousand pesos.
Section 64. The capital stock and funds of a trust company may be loaned or
otherwise invested as its by-laws prescribe; if it does a commercial banking
business in addition to its trust business, the investment of its funds other than
trust funds shall be governed by the relevant provisions of Chapter IV of this
Act.
Real estate acquired by a trust company, in whatever manner and for whatever
purpose, shall likewise be governed by the relevant provisions of section
twenty-five of this Act.
Section 65. As security for the faithful performance of its trust duties, every
trust company, before transacting trust business, shall carry on deposit with the
Central Bank of the Philippines, cash or securities approved by the Monetary
Board in an amount equal to not less than two hundred and fifty
pesos: Provided, however, That the Monetary Board shall require any trust
company to increase the amount of its securities on deposit with the Central
Bank whenever in the judgment of the Monetary Board such increase is
necessary by reason of the growth of the trust business of the company: And
provided, further, That the paid-up capital and surplus of the company must be
at least equal to the amount required to be deposited with the Central Bank in
accordance with the provisions of this paragraph. Should the capital and surplus
fall below said amount, the Monetary Board shall have the same authority as
that granted to it under the provisions of the last paragraph of section twenty-
two of this Act.
A trust company, so long as it shall continue solvent and comply with the laws
of the Philippines, shall have the right to collect the interest earned on any
securities so deposited and, from time to time, with the approval of the
Monetary Board, to exchange such securities for others.
All claims arising out of the trust business of a trust company shall have priority
over all other claims as regards the securities deposited as above provided. The
Monetary Board may not permit the securities deposited in accordance with the
provisions of this section to be reduced below the minimum amount of two
hundred and fifty thousand pesos until the depositing company shall discontinue
its trust business and shall satisfy the Monetary Board that it has complied with
all of its obligations in connection with such business.
No assets held by a trust company in its capacity as trustee shall be subject to
any claims other than those of the parties interested in the specific trusts.
Section 66. Every trust company, before the declaration of a dividend, shall
carry to surplus ten per cent (10%) of its net profits accruing since the last
preceding dividend until the surplus shall amount to twenty per cent (20%) of its
authorized capital stock and no part of the surplus shall at any time be paid out
in dividends, but losses accruing in the course of its business may be charged
against the surplus. Nothing herein contained shall prevent the accumulation of
a larger surplus than the above prescribed should the directors so decide.
Section 67. The ordinary business of a trust company shall be transacted at the
place of business specified in its articles of incorporation. But any trust
company may, with the prior approval of the Monetary Board, establish
branches in the Philippines, and the said company shall be responsible for all
business conducted in such branches to the same extent and in the same manner
as though such business had all been conducted in the head office.
For the purposes of this Act, the company and its branches shall be treated as a
unit.
CHAPTER VIII Branches and Agencies of Foreign Banks
Section 68. In the case of a foreign bank which has more than one branch or
agency in the Philippines, all such branches and agencies shall be treated as a
unit for the purpose of this Act, and all references to Philippine branches and
agencies of foreign banks shall be held to refer to such units.
Section 69. In the case of Philippine branches of foreign banks, the provisions
of this section shall replace those of sections twenty-two and thirty of this Act,
except insofar as is specified to the contrary in the last paragraph of this section.
In order to provide effective protection of the interests of the depositors and
other creditors of Philippine branches of foreign banks, the head office of such
branches shall fully guarantee the prompt payment of all liabilities of its
Philippine branch.
The Monetary Board shall from time to time direct the Superintendent of Banks
to make such investigations as it may deem necessary to ascertain that the
aforesaid guarantee by the head office represents effective protection of the
depositors and other creditors of the branch. Should the investigations of the
Superintendent of Banks indicate that said guarantee is inadequate, the
Monetary Board may take such measures as it is authorized to take in the case
of capital deficiencies, under the provisions of the third paragraph of section
twenty-two of this Act. The Board may, further, as long as the guarantee of the
head office is deemed inadequate, require the head office to assign to its
Philippine branch an amount of capital sufficient to meet the minimum capital
requirement established in section twenty-two of this Act.
Nothing in this section shall be held to prevent a branch of a foreign bank from
assigning capital to its Philippine branch, and from being governed by the
provisions of section twenty-two or thirty, as the case may be, instead of by the
provisions of this section. In such cases, the term "capital accounts" shall be
held to include all net amounts due by the branch to its head office and to other
branches thereof outside the Philippines.
Section 70. In the case of Philippine branches of foreign banks, the present
section shall replace sections twenty-three and thirty-two of this Act.
Except as the Monetary Board may otherwise provide, the total liabilities of any
person, or of any company, corporation, or firm, to the Philippine branch of a
foreign bank for money borrowed, with the exception of money borrowed
against obligations of the Central Bank or of the Philippine Government, or
borrowed with the full guarantee by the Government of payment of principal
and interest, shall at no time exceed fifteen per cent (15%) of the sum of:
(a) The net amount due by such branch to the head office and branches outside
the Philippines, and
(b) The total capital accounts, if any, representing funds definitely assigned to
the branch by the head office.
The liabilities of any borrower may amount to a further fifteen per cent (15%) of
the two items mentioned in subsections (a) and (b) of this section, provided the
additional liabilities are adequately secured by shipping documents, warehouse
receipts or other similar documents transferring or securing title covering
readily marketable, non-perishable staples, which staples must be fully covered
by insurance, and must have a market value equal to at least one hundred and
twenty-five per cent (125%) of such additional liabilities.
The term "liabilities" as used herein, shall mean the direct liability of the maker
or acceptor of paper discounted with or sold to such bank and the liability of the
endorser, drawer, or guarantor who obtains a loan from or discounts paper with
or sells paper under his guaranty to such bank and shall include in the case of
liabilities of a co-partnership or association the liabilities of the several
members thereof and shall include in the case of liabilities of a corporation of all
subsidiaries thereof in which such corporation owns or controls a majority
interest. But the discount of bills of exchange drawn in good faith against
actually existing values, and the discount of commercial or business paper
actually owned by the person negotiating the same, shall not be considered as
money borrowed, for the purposes of this section.
Whenever, and to the extent that, the head office of a Philippine branch of a
foreign bank guarantees the repayment of liabilities of its branch, the limitation
established in this section shall not apply. Moreover, nothing in this Act shall be
construed as restricting in any manner loans made by the Philippine branch of a
foreign bank for the account of, and with funds supplied by, its head office or
branches outside the Philippines, but the Monetary Board may require that all
such loans be reported to it in accordance with such rules and regulations as it
may issue on the subject.
CHAPTER IX General Provisions
Section 71. Any opinion, ruling, or regulation made or issued by the
Superintendent of Banks may be appealed to the Monetary Board, which shall
have the power and authority to confirm, modify or repeal such opinion,
decision, ruling or regulation made or issued as aforesaid; but the action of the
Monetary Board with respect thereto shall be subject to judicial review.
Section 72. In addition to the operations specifically authorized elsewhere in
this Act, banking institutions other than building and loan associations may
perform the following services:
(a) Receive in custody funds, documents, and valuable objects, and rent safety
deposit boxes for the safeguarding of such effects;
(b) Act as financial agent and buy and sell, by order of and for the account of
their customers, shares, evidences of indebtedness and all types of securities;
(c) Make collections and payments for the account of others and perform such
other services for their customers as are not incompatible with banking business.
The banks shall perform the services permitted under subsections (a), (b) and (c)
of this section as depositories or as agents. Accordingly, they shall keep the
funds, securities and other effects which they thus receive duly separated and
apart from the bank's own assets and liabilities.
The Monetary Board may regulate the operations authorized by this section in
order to insure that said operations do not endanger the interests of the
depositors and other creditors of the banks.
Section 73. Banking institutions shall not engage in insurance business as the
insurer.
Section 74. No bank or banking institution shall enter, directly or indirectly, into
any contract of guaranty or suretyship, or shall guarantee the interest or
principal of any obligation of any person, co-partnership, association,
corporation or other entity. The provisions of this section shall, however, not be
held to apply to the borrowing of money by any such bank or institution through
the rediscounting of its receivables, or otherwise, as may be permitted by law,
nor to the granting or guaranteeing of acceptance credits in the ordinary course
of its business. Nor shall the provisions of this section apply to the certification
of checks or to transactions involving the release of documents attached to items
received for collection, nor to any other transaction which may properly be
regarded as common usage and accepted banking practice.
Section 75. Banks shall grant loans only in the amounts and for the periods of
time essential for the effective completion of the operations to be financed.
Section 76. Before granting a loan, banks must exercise proper caution to
ascertain that the debtor is capable of fulfilling his commitments to the bank.
Toward this end, banks may demand of their credits applicants a statement of
their property and of their income and expenditures. Should such statement
prove to be false or incorrect in any material detail, the bank may terminate any
loan granted on the basis of said statement and shall have the right to demand
immediate repayment of the obligation.
Section 77. The purpose of all loans shall be stated in the contract between the
bank and the borrower. If the bank finds that the funds have been employed,
without its approval, for purposes other than those agreed upon with the bank,
the bank shall have the right to terminate the loan and demand immediate
repayment of the obligation.
Section 78. Loans against real estate security shall not exceed seventy per cent
(70%) of the appraised value of the respective real estate security, plus seventy
per cent (70%) of the appraised value of insured improvements, and such loans
shall not be made unless title to the real estate, free from all encumbrances, shall
be in the mortgagor. In the event of foreclosure, whether judicially or
extrajudicially, of any mortgage on real estate which is security for any loan
granted before the passage of this Act or under the provisions of this Act, the
mortgagor or debtor whose real property has been sold at public auction,
judicially or extrajudicially, for the full or partial payment of an obligation to
any bank, banking, or credit institution, within the purview of this Act, shall
have the right, within one year after the sale of the real estate as a result of the
foreclosure of the respective mortgage, to redeem the property by paying the
amount fixed by the court in the order of execution, with interest thereon at the
rate specified in the mortgage, and all the costs and other judicial expenses
incurred by the bank or institution concerned by reason of the execution and
sale and as a result of the custody of said property less the income received from
the property. However, the purchaser at the auction sale concerned shall have
the right to enter upon and take possession of such property immediately after
the date of the confirmation of the auction sale and administer the same in
accordance with law.
Similarly, loans on the security of chattels shall not exceed fifty per cent (50%)
of the appraised value of the security, and such loans shall not be made unless
title to the chattels, free from all encumbrances, shall be in the mortgagor.
The Monetary Board may, by regulation, prescribe further security requirements
to which the various types of bank credit shall be subject, and, in accordance
with the authority granted to it in section one hundred eleven of the Central
Bank Act, the Board may by regulation reduce the maximum ratios established
in the present section, but in the exercise of the aforementioned authority, the
Board shall in no case fix ratios greater than those established herein.
The Monetary Board may, similarly, in accordance with the authority granted to
it in section one hundred eleven of the Central Bank Act, reduce the maximum
permissible maturities specified in this Act for various types of bank loans, but
in no case shall the Board exercise such power to authorize maximum maturities
greater than those established in this Act. Any reduction by the Board of the
maximum maturities specified in this Act shall apply only to loans made after
the date of such action.
Section 79. The amortization schedule of bank loans shall be adapted to the
nature of the operations to be financed.
In the case of loans with maturities of more than three years, provision must be
made for periodic amortization payments, but such payments must be made at
least annually: Provided, however, That when the borrowed funds are to be used
for purposes which do not initially produce revenues adequate for regular
amortization payments therefrom, the bank may permit the initial amortization
payment to be deferred until such time as said revenues are sufficient for such
purpose, but in no case shall the initial amortization date be later than three
years from the date on which the loan is granted.
Section 80. Borrowers may at any time prior to the agreed maturity date prepay,
in whole or in part, the unpaid balance of any bank loan.
Section 81. The Monetary Board may by regulation prescribe the conditions and
limitations under which banks may grant extensions or renewals of their loans.
Section 82. Banks and banking institutions incorporated under the laws of the
Philippines shall not advertise the amount of their authorized or subscribed
capital stock without indicating, at the same time and with equal prominence,
the amount of their capital actually paid-up.
No branch of any foreign bank doing business in the Philippines shall in any
way announce the amount of the capital and surplus of its head office, or of the
bank in its entirety without indicating at the same time and with equal
prominence the amount of the capital, if any, definitely assigned to such branch.
In case no capital has been definitely assigned to such branch, such fact shall be
stated in, and shall form part of, the advertisement.
Section 83. No director or officer of any banking institution shall, either directly
or indirectly, for himself or as the representative or agent of others, borrow any
of the deposits of funds of such bank, nor shall he become a guarantor, indorser,
or surety for loans from such bank to others, or in any manner be an obligor for
moneys borrowed from the bank or loaned by it, except with the written
approval of the majority of the directors of the bank, excluding the director
concerned. Any such approval shall be entered upon the records of the
corporation and a copy of such entry shall be transmitted forthwith to the
Superintendent of Banks. The office of any director or officer of a bank who
violates the provisions of this section shall immediately become vacant and the
director or officer shall be punished by imprisonment of not less than one year
nor more than ten years and by a fine of not less than one thousand nor more
than ten thousand pesos.
In addition to the conditions established in the preceding paragraph, no director
of a building and loan association shall engage in any of the operations
mentioned in said paragraph except upon the pledge of shares of the association
having a total withdrawal value greater than the amount borrowed.
Section 84. If losses have at any time been sustained by any banking institution
equal to or exceeding the undivided profits on hand, no dividend shall be
declared; and no dividend shall ever be declared by any such bank while it
continues in banking operations to an amount greater than its net profits then on
hand, deducting therefrom its losses and bad debts. All debts due to any such
bank on which interest is past due and unpaid for a period of six months, unless
the same are well-secured and in process of collection, shall be considered bad
debts within the meaning of this section.
Section 85. Any director or officer of any banking institution who receives or
permits or causes to be received in said bank any deposit, or who pays out or
permits or cause to be paid out any funds of said bank, or who transfers or
permits or causes to be transferred any securities or property of said bank, after
said bank becomes insolvent, shall be punished by fine of not less than one
thousand nor more than ten thousand and by imprisonment for not less than two
nor more than ten years.
Section 86. In case of the voluntary liquidation of any bank or banking
institution incorporated under the laws of the Philippines, or of any branch in
the Philippines of a foreign bank or banking corporation, written notice of such
liquidation shall be sent to the Monetary Board before such liquidation is
undertaken, and the Monetary Board shall have the right to intervene and take
such steps as may be necessary to protect the interests of the creditors.
Section 87. Unless otherwise herein provided, the violation of any of the
provisions of this Act shall be punished by a fine of not more than two thousand
pesos or by imprisonment for not more than two years, or by both. If the
violation is committed by a corporation, the same shall, upon such violation
being proved, be dissolved byquo warranto proceedings instituted by the
Solicitor General: Provided, That nothing in this section shall be construed as
repealing the other causes for the dissolution of corporations prescribed by
existing law, and the remedy provided for in this section shall be considered as
additional to the remedies already existing.
CHAPTER X Final Provisions
Section 88. All authority now vested in the Bank Commissioner and the Bureau
of Banking with respect to the establishment, operation or liquidation of
banking and credit institutions, and branches or agencies thereof, are hereby
transferred to the Central Bank.
Section 89. All authority now vested in the Secretary of Finance with respect to
the establishment, operation or liquidation of banking and credit institutions, or
branches or agencies thereof, shall be transferred to, and exercised by the
Monetary Board of the Central Bank.
Section 90. Sections one hundred seventy-five to one hundred eighty-three and
one hundred ninety-nine to two hundred seventeen of the Code of Commerce, as
amended; sections one hundred three to one hundred forty-six and one hundred
seventy-one to one hundred ninety of Act Numbered Fourteen hundred and
fifty-nine, as amended; Acts Numbered Thirty-one hundred and fifty-four and
Thirty-five hundred and twenty, and all laws or parts thereof, including those
parts of special charters of the Philippine National Bank and of other banking
institutions in the Philippines which are inconsistent herewith, are hereby
repealed.
Section 91. This Act shall take effect on the same day that the Central Bank
commences operation.
Approved, July 24, 1948.